Vulnerable Children: Thinking About The Future
Being a parent can be stressful and exhausting. There are no manuals or professional qualifications to prepare you and you just have to do your best (with parents’ groups, you tube videos, advice (often unsolicited!) from family and friends and copious amounts of coffee) to give your children the tools they will need to look after themselves when you have gone.
Being a parent of a disabled child brings a whole raft of different stresses and exhaustion. Raising a child who may never have the skills to look after themselves is a daunting and an upsetting prospect.
Planning your Will is particularly important. While the desire to leave a legacy is natural, there are significant disadvantages to leaving or giving assets outright to a disabled child.
Loss of Benefits
Means-Tested Benefits
One of the most critical considerations is the impact on means-tested benefits. Due to their conditions many disabled children will require government assistance to fund their care and support. Many benefits such as Universal Credit, Housing Benefit and Income Support are means-tested. This means that the amount an individual can receive depends on their financial circumstances. When assets are transferred directly to a child it could result in their assets exceeding the capital allowance leading to a loss of benefits.
A beneficiary of a Will is entitled to the legacy from the date of death and should immediately declare it to the DWP. Individuals often believe that it is possible to sign a Deed of Variation to give the inheritance to someone else or into trust without affecting their benefits. However, this is not the case. The DWP are very likely to treat this as a deliberate deprivation of assets and assess the individual accordingly.
Cost of Care
Lifetime Costs
Disabled children often require additional care and support throughout their lives. This can include educational support, therapies, medical expenses, and adaptations to their living environment. Such care and support is very expensive. In most cases inheritance received from a parent’s estate will not adequately cover these costs, especially if the child has a normal life expectancy.
Any inheritance received will be quickly depleted and parents should consider taking financial advice to plan for the child’s long term care costs. By taking this step parents can judge what they can afford to leave to their child and/or put other arrangements in place.
Residential Care
In cases where parents are no longer able to provide direct care, residential care becomes necessary. Residential care is expensive and, if not eligible for NHS funding disabled children are reliant on the Local Authority to provide care but this, again, is subject to means testing. Leaving assets outright may inadvertently bring the child’s resources over the capital threshold meaning they will have to entirely fund their care until their assets drop below the threshold again.
Will Structure
To mitigate these risks, with careful planning and through the use of Will trusts, parents can ensure their child continues to receive state support and provide a capital fund to help their child purchase extra care or equipment while, at the same time, leaving someone they trust in charge of their child’s finances.
There are many different types of trust and it is important to seek professional advice to make sure that the structure and tax implications are appropriate for you and your child’s circumstances.
Don’t leave it too late. Parents must take action to ensure their child will be financially secure when they have gone. Will trusts offer a way to balance financial security and management of the child’s assets with eligibility for means-tested benefits.
